Figure 34-2. Suppose That Banks Are Less Able to Raise Funds and Raise

question 33

Multiple Choice

Figure 34-2.
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Figure 34-2.The appearance of the long-run aggregate-supply (LRAS) curve

• A)is inconsistent with the concept of monetary neutrality.
• B)is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS₁.
• C)indicates that Y₁ is the natural rate of output.
• D)All of the above are correct.

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Definitions:

Gross Investment In Leased Asset

The total initial cost of an asset that is acquired for leasing out to others, including both the cash price and any additional expenses.

Leased Equipment

Assets that are rented under a contract for a specified period of time, often with terms that specify usage rights and requirements.

GAAP

A collection of commonly followed accounting rules and standards for financial reporting, used primarily in the United States.

Expense Recognition

Expense Recognition is an accounting principle that dictates the specific conditions under which expenses are recognized and reported in financial statements.